In the Land of Nod, there are no transactions costs or taxes (either personal or corporate). Furthermore, individuals and corporations can borrow and lend at the same rate, namely six percent which is the risk free rate. The expected return on the NYSE (Nod-Yawn Stock Exchange) is ten percent. Firm Big is in the malt beverage industry, selling a product called "Milk of Amnesia." Firm Small sells an identical product but with the name "Bud Wiser." The net operating earnings of the two firms are perfectly correlated and have identical distributions except for the fact that while Firm Big is expected to earn $585.60 each year forever, Firm Small is expected to earn only one quarter of this amount. The following information available about the two firms: A researcher at the University of NOD (UNOD) has recently demonstrated that all firms in the malt beverage industry would have a beta value of 1.30, if there were no financial leverage. a. Are the above values consistent with market equilibrium? Explain. b. Assume that an investor owns ten percent of Firm Small's equity. Illustrate in detail, the transactions that she and similar investors might undertake to take advantage of the current prices. In your analysis, be specific about the exact profits earned by the representative arbitrager, the exact amounts borrowed and loaned, etc